Will the Recent Unfolding of Events in the EU Impact Indian Software Firms?

Will the Recent Unfolding of Events in the EU Impact Indian Software Firms?

July 01, 2016 | Business Uncertainty, Software

As the dust settles down after a mayhem sparked off by the shocking referendum outcome in Britain, we look at whether the Indian software firms could feel the impact in the near to middle term.

Currently, for the major Indian software companies, Europe accounts for a substantial part of the revenue. Leading software firms like Infosys and TCS generate about a fourth of the revenue from Europe.

But the looming threat of a possible slowdown both in the EU and Britain could repress Indian software exports’ growth. The threat looks plausible since the global markets, especially the EU and Britain, will be facing a period of uncertainty.

Indeed, one of the reasons why London thrived as the major financial center of the world was its openness to overseas investments and a welcoming milieu, which encouraged competition. But in the wake of recent events, London might be at some disadvantage. This is because; should Britain eventually decides to exit the bloc, then likely restrictions on the free movement of the people, might impede business decisions. Its colossal banking and insurance industry could feel the heat, which in turn, might hurt investments, jobs and growth.

Likewise, post Brexit, it is highly likely that the EU could also become more protectionist. To defend its interest, market and hurt Britain, the EU might tweak regulations, change Free Trade Agreements (FTAs) with other nations. And since London and Brussels will be at loggerheads, competition among the two markets will intensify, which could result in currency wars and prolonged trade negotiation rounds under a new setup.

The outcome of the poll might also embolden other far-right groups in the EU who are demanding an exit from the EU. Such eventuality could further shaken the confidence of businesses.

Already, technology spending in the EU was down as businesses were risk-averse before the Brexit vote. Looking forward, businesses might further cut technology-spending in the near to middle term as dark clouds of uncertainty loom over.